Compensation to be paid 'by Christmas' for tracker victims
BANKS at the centre of the tracker mortgage scandal will begin paying compensation to their victims by Christmas, the Government believes.
Representatives from Bank of Ireland, Permanent TSB and KBC Bank will meet with Finance Minister Paschal Donohoe today in what Government sources are building up as a “showdown”.
Over the course of the week, CEOs of eight other institutions that overcharged customers will be hauled in for meetings, including Ulster Bank tomorrow and AIB on Wednesday.
Sources told the Irish Independent the vast majority were expected to agree to a demand to begin compensating customers before the end of the year.
However, it is understood one bank is showing resistance to the Government’s intervention.
“There seems to be movement with all of them except one but we’ll see what the meetings bring. If they don’t co-operate, then we will insist on enforcement action immediately,” said a source familiar with the process.
The source pointed to the case of Springboard Mortgages which was last year fined €4.5m for overcharging customers for their tracker mortgages.
The lender agreed to pay the penalty, which had been imposed for breaches under the Central Bank’s consumer protection codes.
“The reality is enforcement isn’t about the fine. It’s about reputational damage for the bank,” a source said.
At least 20,000 customers are believed to have been wrongly denied a tracker mortgage in that they paid thousands of euro more in interest than they should have.
Fianna Fáil has estimated the ultimate cost of redress and compensation could amount to €500m.
Ahead of Mr Donohoe’s meeting, Junior Finance Minister Michael D’Arcy has offered the lending institutions “some friendly advice”, saying they need to fix the situation or they will be heavily affected by Government action.
He said “the well is empty” in terms of patience with the banks, and all options are on the table.
Mr Donohoe will brief the Cabinet on his discussions when ministers meet this evening. The meeting has been brought forward from tomorrow because Taoiseach Leo Varadkar is travelling to France to meet with President Emmanuel Macron.
Mr Varadkar said “less than half of people have been compensated”.
“That’s not good enough. We’d expect compensation to be under way at the very least by the end of the year.
“We’re very frustrated with the lack of progress to date. We’re certainly not ruling out further regulations, further sanctions or additional taxation of the banks.”
However, speaking at Fine Gael’s presidential dinner over the weekend, he refused to criticise Central Bank Governor Philip Lane for his performance at an Oireachtas committee last week.
Prof Lane said the Central Bank was asking banks to write to people they refuse to give trackers back to, and told victims they can either go to the courts or ombudsman. This is despite the fact the Central Bank has warned there will be “substantial” numbers in addition to the 20,000 tracker-denial cases already disclosed.
Asked whether Prof Lane’s statements failed to meet expectations, Mr Varadkar said he would “rather see the pressure and focus being put on the banks over the next week or so”.
But Environment Minister Denis Naughten last night told the Irish Independent that the Central Bank “must review its own handling of this entire issue from start to finish”.
He expects the banks’ CEOs to bring a “concrete timetable for the restoration, redress and compensation plans for customers”.
“These customers have been unfairly and unscrupulously targeted by financial institutions and, as a result, have exposed an underlying culture which clearly still exists within the financial services sector,” he said.